"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." ~ George Soros

Monthly Archives: January 2015

“Why do we compare our portfolio’s YTD performance with that of Mutual Funds, UITFS, or even the PSEi“?

Most traders would use that as a benchmark. Admittedly, I am one of them. I always had it in my mind that I should be able to do double PSEi’s performance.

But since I do trading FULL TIME– I realized that this is a BIG mistake.

Here are some of the records of equity funds in the PH scene. Now let’s see how the PSEi performed for the last 5 years.

I got this from the Philequity site, so here’s PSEi’s 5 year performance, if you get the average of 2010-2014 then that will be 19.75%

Mutual funds’ 5 year average is at 18.20% (these are mostly MFs, list is incomplete, if we included UITFs I think the average will be higher.), while the 5-year average of PSEi is pegged at 19.75%… Isn’t that a big hmmmmmm…….?
Only a few of these funds really out-performed the 5-year bull market: Philequity’s two funds, and FAMI.

If you’re really really really busy, then cool leave your money to these funds, but take note, you are not maximizing the potential of your money. You’re just getting something steady. (which is OK for many of the typical average/conservative investor.)

Institutional funds have certain advantages:

1. They are pros — CFAs, MBAs, Foreign business schools, IQ 6666666666+ many geniuses are employed by these institutions. most of em well experienced, 5 years, 10 years, 20 years veterans. I am merely stating the fact that these institutions are indeed composed of people who are SMART and who have all the credentials one can dream of.

2. Access to top-research — These insto’s have solid research teams. They engage into all kinds of activities just to gain info advantage. They have the capability to build relationships with the companies they invest in.

3. They do it full time. — perhaps if you’re really super busy to even check your account once a week, then just leave it to the fund managers. They are experienced, and they are supposed to know the industry.

Now even if these reasons sound SOLID, why do MOST of them under-perform the Index?

Now I’ll tell you why these funds are at a disadvantage. It is because the whole mutual fund system works around several operational limitations that (IN MY OPINION) hinder their potential:

When you start handling significant money, you start to feel the importance of liquidity. Yes you can easily swing around 100k to 1m, but the case is different when you’re swinging 10m, then it gets harder when you’re swinging 100m++. Everything is affected by your size, from decision making, trade selection, exposure levels, to timing. Institutions are at a disadvantage / or a challenging position because of their SIZE.

It is a big challenge to handle billions, when the market you are trading is small / illiquid,

2. Insto’s have limitations in stock picking.

Most funds are limited to bluechip names / big caps / small caps that have credibility.

They cannot invest into new names immediately, they have to seek management approval, if the higher management does not agree with the fund manager, then that’s a NO GO on the new name.

Only a few funds / managers have the freedom to invest in a broader range of small caps.

3. They have to explain most of their actions to the stakeholders of the organization (more limitations)

In the insto space since they try to be as legitimate and as smart as they can, every trade/investment should be backed by whatever solid decision making process that they have.

As a fund manager, if you haven’t proven yourself and you’re not the top honcho, you will have to explain every single shit of a move to your BOSSES, CLIENTS, TEAM MATES.

You have to back that with some solid numbers and data—valuations, forecasts, industry analysis, and all kinds of shit to make your call justifiable. This is a normal protocol on most PH funds, the problem is…in reality… a RIGID decision framework does not always equate to good PERFORMANCE.

by the time you’ve arrived with your perfect analysis, the market has already moved against you. Too much thinking is counter-productive.

An example would be $MAXS, $DNL or perhaps $HOUSE, these small-caps have potential, but I’m sure only a few funds hold them, or only a few funds have APPROVAL to even hold these stocks. By the time they get approval, and by the time they’ve finished their perfect analysis they’ve missed bulk of the move already.

Also even if the fund manager has a strong feel that the market will crash or correct, they cannot go 50% cash or 70% cash or something. This is one big disadvantage. whereas, a small fish like me can just go 100% cash anytime I want.

4. Diversification = ITLOG

This is a principle that seems good in theory, but in reality, it is not that effective, if you know what you’re doing.

Diversification is good if you’re exposing yourself to the right kinds of correlations / anti-correlations and if you’re taking advantage of different strategies. The problem is most bluechips are CORRELATED and when you invest into a single fund they will most likely employ one single core strategy.

Unlike us retail traders, insto’s cannot go zero weight slowpokes like TEL and GLO and other crap. Because they’re bench-marking on the index, most of them always have to maintain exposure to at least majority of the components of the index.

Also, as part of their risk management metrics, most funds cannot go more than 20% exposure on a conviction idea. (no matter how good it is). For me this is the biggest disadvantage, because of this limitation they cannot fully take advantage of special stocks / situations

Upon reflection.. I finally found the right benchmark for myself.

Given the disadvantage of these funds, I’ve come to realize that instead of aiming for double the performance of these funds, or the index. I’ll take the challenge of committing myself to achieve QUADRUPLE my benchmarks every year from hereon.

Why QUADRUPLE?

Unlike insto’s, small fishes like you and me can operate without the MF disadvantages that I highlighted:
1. We can go have 30%, 50%, 100% on a single stock or theme when we have a strong conviction call. (this is useful at the right moments.

2. You can trade/invest in any name INSTANTLY, without under-going tedious management/operations related protocols. Your investment list is wider, thus having the capacity to trade some high fliers (given you know how to manage them.)

3. When the market is weak, you can just sell everything and go minimal exposure (0-30%)

Here are some stocks that I have sniffed–sensing some trails of SHABU potentialwithin them.

You may be wondering where the hell I get these stock picks. Sometimes I use my favorite dart set to hit on my wall filled with stock codes. Sometimes I use my proprietary SHABU system to identify plays, I just don’t post my methodology inpublic because my momma will get mad

All that you will see in SHABU ANALYSISare merely Price + Volume, some lines, and some ranges in the form of rectangular boxes, because most of the time I’m too high and drunk to look at complicated indicators.

Instos are accumulating this shiz. One of em, the SB Trust fund (or whatever they call themselves). They’re actually one of the top performing funds last year, going heavy NIKL + DNL. So…. I wonder why they like MAXS? All I know is I like their chicken….

30-31-32 is a ressitance, but at this rate, that range is good as broken.

Btw this stock is so wild, everytime it dips, making you think it has no buyers anymore, it suddenly rallies up and eats the shit out of everyone.. (just like $X)

Will the chicken fry? or will it fcking fly?

$PNB

Props to Ms Nikki Yu for mentioning this.

It looks like an MBT type bottom, again many small-caps banks are under-appreciated

Trigger around 84-85

$HOUSE

Last year, I’ve mentioned in my FB that this might start a trend by 2015.. At this rate… seems like it heard me…

One of the most discussed/hyped/loved/hated stocks, will probably get you by surprise. Now it is widely looked-upon by SERIOUS institutions. What does that tell you?

I dunno, I’m just a mere drug pusher.

Trigger at 8.50-8.60

I like to keep my shit simple, no need to make it fancy.

Note: this aint a reco to buy/sell shit, take these as references, and for entertainment. Act on your own judgement.

Here are some stocks that I have sniffed–sensing some trails of SHABU potentialwithin them.

You may be wondering where the hell I get these stock picks. Sometimes I use my favorite dart set to hit on my wall filled with stock codes. Sometimes I use my proprietary SHABU system to identify plays, I just don’t post my methodology inpublic because my momma will get mad

All that you will see in SHABU ANALYSISare merely Price + Volume, some lines, and some ranges in the form of rectangular boxes, because most of the time I’m too high and drunk to look at complicated indicators.

$BLOOM

Signals were right, it indeed was strong. Seems like it will be the leader of gaming once again. Not sure how Solaire is faring vs CoD but the stock has spoken. Doing 13.10-13.20 as of writing. You’ll see the picture was 12.80s market was not yet open that time

$AGI

Been a sucky stock for most of 2014, and it seems like it has held the 20-21 level. Now it’s sparking interest, you’ll be wondering if it’s just brought upon by the general bull market or is there really something changing in the fundamentals of $AGI?

Perhaps some positive development in $EMP or $RWM? Let’s see.

$MBT

Turn around due to the the reco of a foreign house with a TP of 135 or something. Anyway this has long been cheap in terms of fundamental metrics, and now it is trying to lead Financials this 2015. Now it’s giving out rights to avail more shares, some people think its bad, but retail opinion don’t really matter.

For fundies who want this name, they’ll gladly pay up for this knowing that they’re in it for the long haul. Any price distortion after the offering will be temporary if this name is to really lead 2015.

What interests me btw are not the BIG CAP banks, but the SMALL CAPs. I think there’s lots of money to be made on that space. Open your eyes and your noses.

$JGS

When it comes to conglos, I think this one is perfectly positioned. Simply because it owns URC + CEB . If there’s a holding company you want to own in this bull run. This is the one.

Other conglos are ok, defensive themes such as LPZ (EDC + FGEN + ABS) , MPI, assess which theme is the most attractive.

Yes maraming umiyak bakit nag private placement from 70 to 61, but these people fail to look at the bigger picture.

It’s good that the company actually provided PP shares at that price range, (biruin mo dinala na agad sa support) It’s actually a blessing, if you really think that this will be a STRONG name this year. This stock tends to be illiquid, and if you’re a fund manager, you’d want to be able to accumulate before letting the stock fly.

$ICT

This one I find quite interesting… though you may say “wow ang mahal na”, “masyado ng mataas”

Perhaps there is a reason why it’s up there. No matter the market panic, global news, all the bearish elliot projections, and all the negative crap, this one seems to be holding up.

Upon checking its numbers and its story, seems like this has strong potential (or maybe I am just drunk)

Remember when $JFC and $URC was doing 100 and everyone was saying it was expensive? Take a deeper look and you will understand.

That’s it for today’s SHABU ANALYSIS

Blue chips muna.. back to basics

I’ll be posting more interesting, probably some speculative names in the future, let this market flow first.

I like to keep my shit simple, no need to make it fancy.

Note: this aint a reco to buy/sell shit, take these as references, and for entertainment. Act on your own judgement.